Why The $15 Minimum Wage Will Cost California 400,000 Jobs

The Los Angeles city skyline stands in front of the snow covered San Gabriel Mountains after a snowstorm hit the region on December 31, 2014. AFP PHOTO/MARK RALSTON (Photo credit should read MARK RALSTON/AFP/Getty Images)

In the new year, less-skilled workers across California will face an old, familiar threat to their employment: A soaring minimum wage.

In 2016, Gov. Jerry Brown signed a bill that put the state minimum wage on track to reach $15 per hour by 2022. The next increase—from $10.50 to $11.00—is scheduled for Jan. 1, 2018. If you're a business in one of thirteen different California localities--from Mountain View to Milpitas, and from San Jose to Santa Clara--the required wage floor will rise even higher.

When he signed $15 into law, Gov. Brown seemed to understand that the increase was a bad idea, acknowledging that "economically, minimum wages make not make sense." Today, California's good intentions are catching up with it.

A new study released this week by the Employment Policies Institute (EPI), where I serve as managing director, takes a longer-term look at California's minimum wage experiment. The state's minimum wage began to deviate significantly from the federal standard in the late 1990s, a trend that continues today. David Macpherson of Trinity University and William Even of Miami University analyzed employment data over this time period, with a specific focus on industries with a higher percentage of lower-paid employees. They find that a 10% increase in the minimum wage causes a nearly 5% reduction in employment in these industries.

Based on the state's historical minimum wage experience, they estimate California will lose approximately 400,000 jobs by 2022 when $15 is phased in. Retail and food service employees are hit especially hard by wage increases; nearly half of all job loss comes from these industries.